A step towards state control over part of the Mexican economy, something usually associated with authoritarian regimes, was taken with the publication –a Christmas surprise without due public consultation– of new rules for importing fuels which are subject to regulation by the Energy Ministry (known as Sener).
Sener says its intention is to improve the country’s energy security and to support Petróleos Mexicanos (Pemex), the state-run oil company. That sounds just fine, but there is another malicious purpose. The new rules do not propose giving Pemex the means or ability to achieve better performance in the fuels business, but rather seek to strangle the fuel market, inhibit or cancel activities of other companies –which could be both allies of Pemex and global brands– and put part of the economy under state control.
The role that Sener has taken on, by giving itself powers to discretionally allow or prohibit fuel imports, without establishing clear and fair criteria, is alarming. Knowing that Pemex cannot supply most of domestic demand with its own production, Sener has decided to make the decisions, in an ongoing manner, regarding who can and who cannot import fuels and when and how much can be imported.
The plan aims at measuring how much fuel Pemex can produce and supply and, using this baseline, Sener will endorse, modify or cancel requests from private-sector firms to import fuels. This is independent of whether import permits are valid or not. Going forward, existing permits will be valid for only 5 years, instead of 20, which will prevent Pemex from having strong competitors.
This means that, instead of having private-sector companies purchasing and importing fuels based on their needs, now Sener will tell them whether they can make these purchases or not. If Sener denies authorization, supposedly the private-sector companies will be able or will want to buy from Pemex.
This reverses recent progress towards a diverse and robust gasoline market. It goes against competition, free markets, trade agreements and common sense. The new rules imply that Sener will influence all transactions, based on its own calculations of how much Pemex can supply and how much will have to be imported. But what if its calculations fail?
Sener has no way of knowing, and even less of precisely calculating, what the market requires. It cannot, nor should it try, to evaluate the reasons why a private company defines the volumes of fuels that it requires. In reality, the risks of shortages and system failures will increase, since Pemex does not have the resources to modernize and upgrade infrastructure. What kind of energy security is that?
A step is being taken towards a centralized state-run economy. What the government is doing today in the case of gasoline, is exactly the same thing it could do tomorrow with food, medicine, industrial feedstocks and components, or any kind of merchandise, with the same pretext of national security. This is creating uncertainty for all participants in the economy and is discouraging private investors or even scaring them away.
The government’s energy policy decisions reveal autocratic tendencies, a heavy load of ideology and the purpose of political control. By rejecting calls in good faith from the private sector for conciliation and cooperation, President López Obrador himself intentionally seeks to exclude and deny rights to private parties. This is part of his obsession with restoring Pemex’s monopoly as a vehicle of state control.
A vicious circle of abuse of authority and regulatory confusion can be observed, breaking the constitutional and legal framework. As a result, many matters in the energy sector are being taken to court. The implications of all of this for the economy, democracy and the country are very serious.
* David Shields is an energy industry analyst. His e-mail: firstname.lastname@example.org A Spanish version of this Op-Ed appeared first in Reforma’s newspaper print edition.